Banking News

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No compensation for offshore savings account customers

15 October 2008 / by Rachael Stiles

British savers with money saved in offshore accounts stand to lose all, or most, of their money because the accounts are not covered by the UK's Financial Services Compensation Scheme (FSCS), it has been revealed.

Following the collapse of the Icelandic banking system, thousands of Brits might never again see the money that they have saved in offshore accounts in order to avoid paying tax on it.

Customers of Landsbanki Guernsey, for example, do not have access to the UK's compensation scheme and Guernsey does not have a compensation scheme in place, Although Guernsey's treasury and resources minister, Charles Parkinson, has said that he will do all he can to put a Depositor's Protection Scheme in place by the end of the year, this will be of little comfort to those who have already lost their savings.

Those with savings accounts based in the UK, however, will be protected up to £50,000 each, or £100,000 for joint accounts, and the UK Treasury has confirmed it will guarantee 100 per cent of savers with money frozen in Icesave – the online savings accounts arm of Landsbanki, which was once Iceland's biggest bank, but is now nationalised.

Rick Garrard, who has been appointed as administrator of Landsbanki Guernsey Limited says that he is "taking all possible steps to safeguard the interest of depositors." but added that, "At this time it is unclear whether depositors will receive all of their deposits and accumulated interest outstanding".

Failing the appearance any compensation from the bank itself, the only other hope for Landsbanki Guernsey's customers is using court-appointed administrators to recover their money.

One angry Landsbanki Guernsey customer told the Guernsey Press: "We did not gamble on a horse, we put our money in a bank. Substantial amounts do not cut it. Anything less than 100 per cent would be a severe travesty of justice."

The Isle of Man, on the other hand, has just increased its compensation scheme for savers from £15,000 to £50,000, covering all depositors, regardless of whether or not they live on the island.